tv [untitled] September 13, 2011 1:52pm-2:22pm PDT
meeting to remember eloise west brought and remembering a. thank you. >> thank you, miss jackson. now would be inappropriate time to take a moment and offer our condolences to you and your community and to the rest of the world for her lost and all of the good work she has done. if we can take a moment right now to appreciate her. thank you, miss jackson. >> afternoon, commissioners. i again would like to echo the idea that if it is possible for
the commission and general manager to attend the service of miss westbrook this thursday, it will be a very important moment because of all the work that mother jackson had expressed. when i first got involved in working with the community, she would tell me a lot of stories about the work together with the model cities agency which they all know has its roots from that wa poverty to community development block grant funding. the citizen's committee on community development that i am honored to serve on the committee that she helped set up. i heard a lot of the stories about the idea of putting the community to work. what i have learned is that feeling is really of this moment, relying on good faith efforts to get communities to
work on these jobs have failed and led the city to move forward on a series of reforms that the general manager was an important supporter of. i think that we are part of a continuum, all of us going back to miss west brother, another jackson, and a lot of us follow on the trail that has been blazed. i think as we seek to address the unemployment in our disadvantaged communities, a lot of the work comes from the work she has done in all of her life. >> we have no other speaker cards. >> communications. commissioners have copies of all of the materials. i also made extra sets of the
letter summary items. >> questions or comments on communications on the calendar? the letters, or the staff reports? >> i have a question. i'm looking at the ongoing calendar. the real estate of dates. at what time can we expect that? >> do want to talk about that? >> a real estate of date in general about the real estate properties and such, we can probably schedule something in late october or early november if that is acceptable. >> as long as we get on the calendar. >> other questions or comments?
>> a couple. i appreciate the fourth quarter report that was submitted and it reflected the extension of the reporting process that was developed, and that is important. i also noticed that there are several items labeled as required attention. i guess i would like to report back from the infrastructure system at some time as to what he's thinking and plan and schedule for the extension not only of the reporting structures throughout the infrastructure division, but also the management practices developed as part of that.
i guess wsip is being promoted that way. the local water supply projects are. but the rest of the capital program is not. it is a format that is useful and would be serving us well. i would like your thoughts on how that extends to the rest of the organization over time. >> i like to see what our program is. >> the second comment, the energy efficiency audit, i thought it was interesting. you can identify the average payback period. there was a cost for providing the electrical service.
we don't get that cost very often. while the program has merit and the abstract level, here on earth, those projects are not paying back until we figure out how it affects those issues. it also pointed out the need to come up with a policy for our investment decisions. i think that is important. in water and other areas, there is a wide range of unit costs on the projects available. those are my only comment. >> i was struck of the investment policy question as well, maybe that is something we can calendar in the coming months to address. other comments or questions on communications?
public comment on this item? >> as a commissioner have a new business or additional things they wish to bring forward other than what is already been mentioned? >> i went on the web site and it has been redone. it looks great. i wanted to comment on that. it is easier to look through and find things. i don't know when that happened, but after all of this feedback we have been given of how difficult the web site was, i want to thank the staff for that. i think it will make a big difference on communications and access for the ratepayers in the public at large. >> much of that has to do with tyrone.
>> a couple comments. i thought the retreat that we had last month was really quite useful. i thought the format was one that served us pretty well. most of our businesses are in the form of actions that we need to take. the format there was much less formal, there was discussion and turned it over to us to have a discussion for a while. if it is also a format that i think we could have here from time to time that depending on the issue is, we don't need to wait for retreat format to do that. the first got distributed yesterday, the water supply memo. i think it would be good to have that come back to the
commission so we can have a discussion on it. i think it will be useful to have a general discussion by the commission. the second item like that is there are several things in the retreat at dawn today's agenda that pointed to a common the. there was a list of water supply projects and what their unit costs were. we got a comment from the citizen's advisory committee suggesting as part of the right of that we had a life cycle processing information. the water supply metal has a wide range, again, of being a cost associated with it. we had a discussion of travel bottom line. and we had a memo that reflected
the concern of the commission, not having it become a christmas tree that we load up with projects. all of that speech to the need to have a transparent way of rationalizing resources investment decisions. i think it would be worthwhile having a discussion about what we mean by that and what we think might be workable. we spend a whole lot of consulting time developing what may be elaborate structures. if they did not get very far, i think it is worth having additional discussion. those are my suggestions. >> if that is the consensus, we
can work with that. >> i think if that sounds right on, and i believe the format question and i believe, it was much more effective this year. if there is a way to integrate it a little bit into every other meeting or discussion around the immediate actions that we need to take and we can maybe do that once a month, maybe the other meetings will be more content rich and we can make more informed decisions. >> will also probably benefit from putting a time and that on those discussions because they can get out of hand. >> a number of city councils consider what they have -- have what they consider working sessions. >> it would be good to continue the conversation in some format.
maybe we can with the calendar to see if there is some way to hit the hot button issues. >> that works the more comfortable you are with consent kelli this. as long as we can make those is clear and transparent as possible, it will give you room that have the kind of conversations. >> i am quite comfortable with the consent calendar model. we have a good general manager at this point, and that might change, that this moment, it feels like it is the everyday contract pieces silicon have these richer conversation. any further funds for, and fly
the fear of the general manager. >> several items today, the commissioners. a meeting of the a month ago, only talk about the status for four had a variety of different- ha. i love to have the staff report on love of our. and of the hat and five of death in their relative few, half of local power. we're trying to a and gave a full the, if off. the telephone lived in them out. the 50 foot of the fate of the
an f of the meetings we have lived in the governor's office in asia the vetting of of of them. -- if you could also say a word of other means we have in the governor's office. >> of the meetings we have been attending with the the governor 's energy team. the president and died and others also attended. we and other allies, folks from the energy authority have been talking with the governors energy advisory team about mechanisms that could be put in
place to help promote community choice aggregation across the state. we think it could be an avenue and a mechanism to end the support of the governor's generation goal for the state. the good news is, those types of folks are extremely busy and have numerous priorities. we have had two meetings now, they are seeking another follow- up meeting. that is what i consider success. >> success in terms of the number of kilowatt hours that we can contribute to the governor's plan? >> in terms of helping convince the governor's team that it will play an important role. >> was part of that discussion a cost that the rate payers would
be < provided by pg&e, or anyone else? >> the rates are part of that discussion. the governor is very concerned about the cost across the board. i don't think he wants to move in the direction of any program that is not going to benefit the ratepayers. i understand it is laudable that we are all going to reach a goal, but at what price? >> those were some of the questions from a couple of those meetings. it started as a conversation around the toe thousand megawatt goal and what kind of role they can play. one thing that surfaced quite quickly was the financing mechanism that would really address rate structure. the risk issues related to the financing of it.
that is something that the staff keeps putting on the table. >> he is doing it to us every week, and rightly so, with the director of finance. an incredible person that heads of the department of finance about how we all have to be so careful about the bonding mechanism. san francisco's credit rating is pretty good, but the state of california's is not. >> the last couple of meetings have been about educating in getting them up to speed. there is still some work to be done in that area. >> with that, i will switch to the other day. i will start out answering questions and refreshen folks in terms of where we are and i will
be followed by the cfo on the mechanisms and options for financing. i didn't wear glasses, i get thrown off. it's up on the screen, very good. to refresh, what are the questions we had at the last meeting? we have four main points. there was question about using that cash and under what circumstances and how large. i had not finalized negotiations on that. the status of where the performance bond is. that is still outstanding. commissioner moran have questions about scaling.
and again, we will see if we can talk about the funding option. >> one quick question, how much have the rate payers are the taxpayers paid already in preparation for this? >> defunding -- the funding for my work -- >> and not yours, all of it. >> the budget that was appropriate in this city. $6 million was appropriated. 5 million was appropriated five years ago, six years ago. $1 million was added this year. back to the slides.
just a quicker fresher and adding to what we had. we were talking about some of the risk and phasing the program. that would be the average lows, offering 100% renewable product. timing the launch of 2012, around the time that the rates switch over to where the generation component of the bill remains constant regardless of energy usage. we're talking about a 4.5 year contract for the energy supply. they were still negotiating that. the internal politics, because it is a different deal, they are used to getting their senior management comfortable with the various ways of having a cap
termination payment. the total appropriations for getting the first phase of the program, 75,000 customers, $19.5 million to get started. we are also very much planning on following the policy of once we get a revenue stream established, that we would be able to start building renewable sources in the city. breaking out with that 19.5 million, there is $500,000 for shell and $500,000 for noble. $15 million is to secure the city's obligation.
there is a structural issue if they don't get enough customers that they would have some skin in the game and they would have the ability to get some compensation if prices were to move and they found themselves in a position where -- they would have to lose money and sell. $15 million out of the $19 million would be put in escrow. we have confidence that that is there. there would have to be subjects to make sure that they wouldn't have gone. and it would be appropriated on top of the $15 million reserves. >> the $15 million city
defaults, i understand that, you mentioned the value of the fuel and the energy. >> only in the instance where our program is unable to continue so a couple of things have to happen. our program is able to continue for whatever reason. we would be into default. that is the form. and we don't necessarily of the $15 million if that happens. what they are going to do is offer a fixed price, they're going to purchase 4.5 years of instruments to buy energies that they are committing to sell to us at a certain price. the expectation is to be able to
get revenues at that price. if we were to terminate early and prices moved against them, after six months, there are four years left of energy that they are committing to buy from someone else. that would have the cell that energy and they are not selling it to us. then there is no penalty. >> and if we terminate prior to expiration, that is litigation? counsel? >> i can answer that if you would like. that is what the next slide is getting into in terms of where the liability is capped. for the liability to be capped,
pretty standard provisions in the energy market. it is pretty commonplace to figure out if one party defaults, how to value that energy and to decide whether or not there is a payment owed to the non defaulting party. we're only having the contract being worked on in such a way that a defaulting party in no circumstances could benefit from defaulting. the uncapped provision, that is the next slide. >> you are referencing the mitigation of whatever has occurred in respect to the purchase of that energy. if it went down, we would be liable for that cost. if it did not, we would still be liable in terms of mitigating the cost or upon the alliance of
their contract with us. >> if the price went up, the expectation is that they could sell it to some other third party and we would not of them anything. >> these trade balance for less than, that is what we are dealing with. >> correct. the liability is capped at $15 million in the instance where the program is not able to have sufficient revenues coming in to the door. because the counterparty was concerned about political risk, they were operating just fine inconsistent. they just want to terminate the program. in the as instances, we were
agreeing that the termination payment would not be capped. >> i have a question. i simply don't understand something. what advantage is it to us to have show purchase this energy they won for 4.5 years out? >> the primary one is that we don't have credit. to enter into the market wholesale energy marketplace, you have to give the counterparties some confidence that you will be able to purchase its for the price specified, and we're talking about millions of dollars. shell is able to enter into those contracts on our behalf with this type of collateral which would be insufficient if we were doing it on our own.
>> they were trying for some rate stability, so you can lock in the rates for a longer time if you're subject to the market value and fluctuations, you would not be able to offer the kind of rate stability. >> my point here is that this type of energy, i feel, will be going down in future years horse soon. what is the advantage of locking in an array when these sources are going to be costing less? >> hail advantage, if there is one, obviously, if the market is such that if there is more demand for renewals, i also think you are right that renewable will go down in terms of its cost, but since california is requiring investor
of utility to provide a greater degree of renewal as part of the normal portfolio, the competition for those same kinds of things will be going of and that has a tendency to make the price go the other direction. there is the risk that when everybody else is trying to buy renewable, we would not be protected in that situation. it is an educated risk mitigation decision to make. >> i don't know if you're going to talk about and if you have as part of your negotiation, the substitution peace that could affect the rate structure as well and could affect pricing to a certain extent. it will beg the conversation on local billed out. if you could address that at some point, too.